Today almost 15 million people enjoy retiree benefits that fill gaps in Medicare. Another 2 million retirees enjoy primary health care coverage through their former employers before they become eligible for Medicare. But, can Americans count on these retiree benefits when they retire? According to a report by the Kaiser Family Foundation, retiree health benefits are eroding or disappearing altogether.
Many fewer employers offer retiree health coverage today than in the past, and there is every reason to believe this trend will continue. Moreover, employers still offering retiree health coverage, for the most part are shrinking the benefits they provide to reduce their costs. Defined contribution plans are increasingly popular because they allow employers to pay predictable amounts and better manage their expenses.
Working people cannot count on the same degree of retirement security from their jobs as their parents had. In 2013, only 28 percent of large firms offered retiree health coverage, down from 66 percent 25 years earlier, in 1988. And, sadly, only 5 percent of people working in companies with fewer than 200 employees have retiree health benefits. As a result, today, not even one in five workers have a job that offers retiree health benefits.
Of note, a far higher percentage of people with Medicare who have retiree health benefits are white, in better health and earn larger incomes than their peers.
Without employer retiree health benefits, retirement costs rise considerably. Putting aside the costs of services Medicare does not cover—hearing, dental, vision and long-term care—a married couple retiring in 2013 without retiree health benefits could well spend $220,000 of their own money to fill gaps in Medicare during their retirement.